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Carl's Jr. Parent Company Defends Marketing Strategy

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CHICAGO ( -- Despite the whirlwind of publicity generated by its Paris Hilton ad, the controversial spot does not appear to have significantly increased Carl's Jr. restaurant sales.
Despite the tepid sales, CKE President-CEO Andrew Puzder called the Paris Hilton ad impact 'nothing short of phenomenal.'
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The chain posted a 1.7% gain in same-store sales for the four weeks ended June 20, while sibling chain Hardee’s posted a 0.7% gain. Both chains are operated by CKE Restaurants of Santa Barbara, Calif.

Carl's Jr. was running the ad for the full four weeks, while Hardee's began running its own version of the ad during the last week of the period.

Expecting higher returns
Analysts and industry watchers were expecting much higher returns in the wake of the worldwide attention paid to Carl's Jr. and its Spicy Barbecue burger courtesy of Ms. Hilton's erotic car-washing escapade in the ad.

During a conference call with analysts after the market closed yesterday, Anton Brenner of Roth Capital Partners said: “Particularly looking at Carl’s same-store sales, it doesn’t appear that there is a noticeable boost from the Paris Hilton ads,” he said. “They might have gotten a lot of attention, it’s hard to squint and see how it has impacted your actual sales performance.”

CKE President-CEO Andrew Puzder called the Paris Hilton burger ad impact “nothing short of phenomenal.” He said: “As I am sure you’ve heard others say you can’t buy this kind of publicity."

Mr. Puzder said Carl's Jr.'s average unit volumes were higher than for any comparable period in a decade. He appeared to put a positive spin on the Paris advertising period by merging it into sales performances over a two-year cumulative period for an increase of 9.9%. He also noted the company's 28 consecutive periods of positive sales.

Lacked 'newness' factor
When grilled further by analysts about the surprisingly tepid sales, Mr. Puzder said the spicy burger that Mr. Hilton promotes in the spot had already been out for two to three months, so it didn’t have the "newness" factor.

“Where would we’ve been without this Paris Hilton ad in this period?” Mr. Puzder said. “We certainly would have sold a whole lot less. I mean we have a lot of people going into restaurants ordering ‘The Paris Hilton burger,’ which was our Spicy Barbecue burger, and you’ve certainly wouldn’t have had those sales but for running the Paris ads. So I think we are –- we were very pleased with the results.”

At least one analyst has downgraded CKE shares after the company reported lower-than-expected earnings yesterday despite higher sales. Larry Miller, restaurant analyst at Prudential Equity Group, singled out financial issues at Hardee’s when he lowered his outlook for the stock.

"We remain concerned that the Hardee's turnaround ... may be in jeopardy," he wrote in a note to investors.

Mr. Puzder explained that the 1,420-calorie Monster Burger with 107 grams of fat launched by Hardees earlier in the quarter “exceeded all of our expectations with respect to both media attention and sales, helping solidify Hardee’s position as the place for big, juicy delicious burgers for young, hungry guys.”

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