Looking for a Special Night Out? Try Hardee's

Fast Feeders Cut Into Casual-Dining Market With High-End Offerings at Lower Prices

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CHICAGO (AdAge.com) -- As if unemployment rates, home foreclosures and the deepening recession weren't enough, the beleaguered casual-dining industry has to fend off new, formidable competition: fast-food chains.

This month Carl's Jr. is launching its Kentucky Bourbon Burger, the kind of product one would expect to see on an Applebee's menu.
This month Carl's Jr. is launching its Kentucky Bourbon Burger, the kind of product one would expect to see on an Applebee's menu.
As consumers increasingly trade down to fast food, several players, such as Wendy's and McDonald's, are working to cement their status as value options. But others are going the other way entirely, marketing higher-end offerings designed to lure the Cheesecake Factory and T.G.I. Friday's faithful.

Burger King will begin selling ribs and thicker burgers this summer as a means to attract families to grab dinner on the go and avoid the stove, said Chief Marketing Officer Russ Klein. Pizza Hut is targeting the same demographic with its Tuscani pastas, which feed four, delivered with breadsticks for $12.99. The chain has said consumer feedback has been positive, although same-store sales up were down 1% in the most recent quarter.

Exploiting segment's weakness
Regional chains such as Hardee's and Carl's Jr. are aiming to exploit casual dining's weakness as well. Andy Puzder, CEO of Hardee's and Carl's Jr. parent CKE Restaurants, said people already know fast-food brands are cheap. The way to distinguish yourself is by advertising quality.

"When we emphasize the quality of our brand as opposed to solely price, then we are competing with casual dining," he said. His chains upped the ante in the last year with "fake restaurant" commercials from agency Mendelsohn Zien in which consumers bring unwitting friends to a "boutique burger restaurant" and watch them pay $14 for a Carl's Jr. burger.

The strategy seems to be working: Carl's Jr. and Hardee's same-store sales are up 2% in fiscal 2009, which ended in January. And this month, Carl's Jr. is launching the Kentucky Bourbon Burger, the kind of product one would expect to see on an Applebee's menu: a black Angus burger with "zero-proof" bourbon glaze, bacon, pepperjack cheese, lettuce, tomato and onion straws.

A real threat
Darren Tristano, exec VP at Chicago restaurant consultant Technomic, said fast-food chains may in some ways present a real threat to casual dining. "Convenience has always been a factor, so that's a big key," he said, adding that casual-dining companies have begun to admit that trading down to lower prices is habit-forming. "It's going to be harder to break back into getting consumers to go back to full service," he said.

Another problem in the casual-dining industry has been homogeneous marketing and product offerings. And during the downturn, chains have also been pushed into price wars, such as Applebee's promotion of two entrees and an appetizer for $20. The chain's same-store sales fell 5% in the most recent quarter.

Chili's, meanwhile, where same-store sales fell 4% in the most recent quarter, has brought back its Bottomless Express Lunch offer: all the soup and salad you can eat for about $7, further narrowing the gap with fast food. The difference, Chili's points out, is that for not much more than the price of fast food, consumers get table service and the special-occasion feel of dining out.

"At Chili's, we see quality food with bold flavors and our ability to deliver great hospitality as key components in our ability to win against [quick-service restaurants] in this highly competitive marketplace," said Krista Gibson, senior VP-brand strategy. "Our outstanding team members provide a level of service that gives guests more than just a meal; it's an experience. And in tough times, when guests are looking for more value than ever, we can provide that through everyday value items like our Oldtimer Burger with a side of fries for less than $7."

Chili's agency is Interpublic Group of Cos.' Hill Holliday, Boston.

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