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Fall 2011
Sarina El
Carl Karcher Enterprises, Inc.
Fall 2011
Table of Contents
Executive Summary Current Marketing Situation Figure A1.1 Financial Standing 5yr Term Market Description Potential Market Segment Product Review Figure A1.2 Customer Need & Our Solutions Competitive Review McDonalds Angus Third Pounder Financial Overview and Nutritional Facts Burger Kings XT Burger Financial Overview and Nutritional Facts Jack in the Boxs Sirloin Cheeseburger Financial Overview and Nutritional Facts Channels and Logistics Chart of Corporate Owned Restaurants vs. Franchise and Licensed Restaurants Franchise Information Overview Franchise Information: Training and Support SWOT Analysis Strengths Weaknesses Opportunities Threats Objectives and Issues 1st Year Objectives 2nd Year Objectives Issues Marketing Strategy Position Product Price Distribution Figure A1.3 Shows Domestic Map of all CKE Restaurants (USA) Marketing Communication Strategy Promotion Mix Advertising Personal Selling Sales Promotion Public Relations Direct Marketing Market Research Market Organization Action Programs Research Test Improve Budgets Controls Page 1 Page 2 Page 3 Page 4 Page 4 Page 6 Page 7 Page 8 Page 8 Page 9 Page 10 Page 11 Page 11 Page 12 Page 12 Page 13 Page 13 Page 14 Page 15 Page 15 Page 17 Page 17 Page 17 Page 17 Page 18 Page 18 Page 18 Page 18 Page 18 Page 19 Page 20 Page 20 Page 20 Page 20 Page 20 Page 20 Page 21 Page 21 Page 22 Page 23 Page 23 Page 23 Page 23 Page 24 Page 24
I.
Executive Summary
Carl Karcher Enterprises, Inc. (CKE) Restaurants is a California based holding company that operates through franchises and licenses for Carls Jr., Hardees, Green Burrito, and Red Burrito concepts (CKE, 2011). A feature product for Carl s Jr. and Hardees, the Six Dollar Burger was and still 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 McDonalds, Burger King, Jack in the Box, and Wendys. The launch of CKEs 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 line 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 QSR 1 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) .
$152,278 $378,846
(Commission, 2010)
Financial data collected using Mergeant, Hoovers and Business Source online databases.
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).
CKEs 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 bachelors 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 companys 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,
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 2011 Sales 1 year sales growth 2011 Net Income 2011 Net Growth Market Capital $3.99 $1.33 Billion (6.21%) ($36.26 Billion) --$462.23 Million
Nutritional Facts for Six Dollar Burger 910 Calories 21g saturated fat 3g trans fat 125mg 2030mg cholesterol sodium 63g 3g fiber 45g carbohydrates protein 54g fat
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.
The Six Dollar Burger is priced at $3.99, yet it rivals sitin 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.
A Menu of Variety
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 wholeleaf 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.
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.
III.
Competitive Review
Following the launch of CKEs 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 McDonalds 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: McDonalds Im 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, McDonalds 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
Statistical Data of McDonalds Angus Third Pounder and Corporation Price 2011 Sales 1 year sales growth 2011 Net Income 2011 Net Growth Market Capital $4.19 $24.07 Billion 5.85% $4.95 Billion 8.69% $80,874.34 Million
Statistical Data of Burger Kings XT burger and Corporation Price 2011 Sales 1 year sales growth 2011 Net Income 2011 Net Growth Market Capital $3.99 $2.5 Billion (6.85%) $1.34 Billion (6.65%) $2,287.12 Million
Nutritional Facts of Burger Kings XT burger 640 Calories 1.5g trans fat 55g carbohydrates 33g fat 185mg cholesterol 4g fiber 10g saturated fat 1260mg sodium 33g protein
A Sirloin Cheeseburger consists of: 1/3 lbs 100% Prime Cut burger patty Bakery style bun American cheese Tomato slice
Statistical Data of Sirloin Cheeseburger and Corporation Price 2011 Sales 1 year sales growth 2011 Net Income 2011 Net Growth Market Capital $3.99 $2.19 Billion 27.78% $1.34 Billion 14.80% $1,181.25 Million
Nutritional Facts of Sirloin Cheeseburger 943 Calories 2 trans fat 51g carbohydrates 65g fat 129mg cholesterol 2g fiber 21g saturated fat 1989mg sodium 40g protein
Other 1 10 -11
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 Developing a site o Submitting a Real Estate o Training your crew package o Getting the Grand o Committing to a Franchise Opening approved Agreement o Opening your unit
Franchise Information: Training & Support6 Before you open, we assist you through After you open, we continue to assist the following: you with: Site selection Field support: we have a team of franchise business consultants who Restaurant design will assist you with your business. Equipment ordering Operations: we provide you with Construction periodic information on a variety of Training 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 6
This chart has been copied from the official website of CKE franchising opportunities. This chart has been copied from the official website of CKE franchising opportunities.
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 Carls Jr. concept restaurants have been co-branded with the Green Burrito, and Hardees 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 CKEs 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
o CKEs 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.
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, McDonalds. 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.
These units were estimated by taking the total sales revenue for CKE and dividing it by 25, assuming that th every 25 customer purchases a Six Dollar Burger.
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 Hardees 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.
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 socioeconomic 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.
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.
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 consumers 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 Dominos 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.
Bibliography
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