CKE Restaurants CEO Andy Puzder loves the company’s flirtatious TV spots, he hates big government, and he gets why his 23-year-old son wonders where the turkey is sourced.
By Laurie Wiegler
This exclusive interview has been edited.
Setting up shop in 1964 as Carl Karcher Enterprises, Inc., by its eponymously named founder, this Carpinteria, Calif., hamburger chain has exploded into four successful businesses, with global reach and some 3,000 restaurants.
In 2016, CKE Restaurants, Inc., boasts two burger brands, Carl’s Jr. and Hardee’s, as well as two side cart businesses, Green Burrito and Red Burrito, the latter two operated inside the burger restaurants. The company has also extended its global reach recently, opening outposts in India, and throughout Japan.
Thus, CEO Andy Puzder has cause to be proud. The 65-year-old took over in September of 2000 after working as the founder’s personal attorney and later as general counsel, and today oversees a business worth a billion plus – dollars, but probably burgers, too.
His business savvy and political smarts — he once worked for Mitt Romney — has made Carl’s Jr. and Hardee’s, as well as the Burrito duo, as successful as they are mouthwatering. It is a strong recipe for the future as the company prepares to relocate to Nashville in early 2017.
Writer Laurie Wiegler interviewed Puzder by phone in March, and he had a lot to say – from why CKE’s sexy TV spots make good business sense to why embracing technology is the way forward.
And, oh yes, why burger success is still all about quality beef.
What effect(s) has co-branding had on the company’s bottom line?
It has worked well. It has added to our sales and to profits. It’s not the kind of driver burgers are, but it’s a nice additive for the business — anywhere from 5 to 15 percent, on the high end, for restaurants. We wouldn’t be out of business if we didn’t have it.
If you wanted to go to lunch, someone might say, “I’d like Mexican,” and another would say, “I’d like a Burger,” so co-branding increases your choices. The other advantage is you don’t want to confuse consumers about who you are, and we are the big, juicy, delicious burgers place. If you run into a Taco Bell and they sell Taco Bell pizzas, you’re going to wonder what they’re doing. They keep a separate ID [from Pizza Hut, a co-brand.]
Your flirty ads featuring female celebs like Paris Hilton in 2005 up through Kate Upton and model Charlotte McKinney (“All Natural”) have caused a stir, but they also seem to have positively impacted your profits. What has the impact been?
The ads definitely drive sales. While we want all ages to come in, our demo is young, hungry guys. The Paris Hilton ad, in particular, elevated Hardee’s from where it was, being [previously] regarded as an elderly person’s restaurant, to where people started to think of it for younger people.
I’d been CEO for about five years when it aired. It was my first experience with the incredible power of the internet and social media. We posted it on our web site in 2005 — websites were all you had then — and it crashed the site, getting 600,000 to 800,000 hits.
Fast forward, and we ran an ad with Kate Upton and it got 2 billion earned media impressions (or free viewings) in March, 2011. And the more recent ad, with Charlotte McKinney in January of 2015, where she’s promoting the All-Natural Burger with no hormones, and she walks into a farmer’s market, got over 4 billion earned media impressions.
These ads have allowed us to hit way above our league.
Talk about Green Burrito and Red Burrito, the co-brands for Carl’s Jr. and Hardee’s in many locations.
Green Burrito started with Carl, who added a Green Burrito into a certain Carl’s Jr. Mexican food was a big to-do in Orange County, California, around 1990, 1991. By 1995, we tested it, and adding it increased sales without cannibalizing them. Since then, we’ve rolled out Green Burritos to more than half our restaurants (through co-branding).
It’s called Green Burrito in California because people there understand that “green” means a chile. In the Midwest, where I’m from, people think green means moldy. So, we decided to call it Red Burrito in that part of the country, for the red sauce on Mexican food. It’s the same concept in both brands — we really treat the two as one and advertise them together.
How did the 2008 passing of your Carl’s Jr. founder, Carl Karcher, affect CKE?
When he died, he hadn’t been involved for five to 10 years. He was 91 when he died, and he was a second father to me. I miss him. I wish he were around to give me advice.
What would he make of the technology that drives the business today?
I think Carl would be fascinated by the technology. You could always kid around and talk about the most recent [technological developments] with Carl.
He was the first to use a char-broiler, rather than frying, using a conveyor belt that cooks by flame, and where the meat isn’t fried. He also told me his was the first brand to offer all-you-can-drink sodas on tap.
The company is actually an international brand now, with Carl’s Jr.’s in remote locations, not only in Europe but around the globe. How did this come about and what has been the most unusual customer feedback you’ve received from a foreign country?
We have a guy named Ned Lyerly (president of CKE International), who is really very, very good at running our international department. I give him a lot of credit for its growth. Our brands include 300 in the Middle East, 200-plus in Mexico. We’re now in 48 foreign countries, having just opened up in Japan in early March. We’ve also recently opened in India and Australia and our restaurants do very well.
We don’t adjust our menus to the extent that some other brands do. We will add regional items, but we basically sell “the American burger” and the image of California.
Continuing success in the U.S. will depend on managing labor costs, particularly in light of the minimum wage hike in some states. Have you seen any effects from your restaurants’ bottom lines?
We’re about 92 percent franchised, so the franchisees have to deal with labor costs. In the restaurants we own, when any costs including labor increases, there are only so many things you can do:
One, increase prices to offset the increase in expense (labor in this case).
Two, manage labor more efficiently. In our restaurants, we are trying to do a better job of managing labor, so we can continue to give the same service level given at sit-down restaurants, but with more efficient models.
Three, try to eliminate positions through automation.
It’s not just restaurants. Every industry is faced with increased costs, whether it’s from labor, the Affordable Care Act, new sick leave legislation, whatever states do to impose costs, and so on. This leads businesses to reduce other costs so they can continue to operate and be competitive.
When I was a kid you pulled into a gas station and four to five guys ran up to the car, checking the oil, pumping your gas. Then, when the embargo hit in the early 1970s, all those guys disappeared and people pumped their own gas. Reducing labor costs, gas stations stayed in business.
[We’re staying competitive with] touchpads for ordering. Touch screens reduce labor costs, and particularly Millennials prefer them. We notice that young people will stand in line to use touch screens even when there are people at the counter waiting to take their order. Consumer preferences drive the business, and the touch screens reduce labor costs because you need fewer people.
What do you do to get away from the grind?
I like to write. I do op-eds for the Wall Street Journal, Real Clear Politics. I just had one in The Hill. It’s great therapy.
And you have a blog.
The blog started out when I was going on TV a lot, when Mitt Romney was running for President. I was his media surrogate on the business channels.
I can’t call 30 people every time I’m on a show, and I have a son who’s very computer savvy. He set up a web site for family members so people could see what I’d written or that I’d been on TV.
Your company has done something unique in this industry, creating a $6 burger, meant to replicate the type of high-quality burger one would enjoy at a sit-down restaurant. How has this higher price point affected your bottom line?
The $6 Burger was supposed to be “a restaurant-quality burger at a fast food price with fast service.” It’s been very, very successful for Carl’s Jr. and was introduced to Hardee’s. In fact, the entire burger menu is now called Thickburgers instead of $6 burgers, because back in 2000, $6 was expensive and now it is less so.
The entire burger menu at Hardee’s is based on thick black angus burgers, and it really started this better burger revolution, though ours are still the best!
The “Burrito California” looks delicious, and also healthful. Talk about CKE’s foray into offering healthier options, not only for the Green Burrito franchises, but at Carl’s Jr., for example, with its Charbroiled Chicken Salad?
We always want to give consumers what they want, and what is healthy changes. I was talking to my 23-year-old son, and we have a turkey burger coming out. It only has 200 calories. He said, “I don’t care about the calories, but where did you source it?” The turkey is all-natural, [hormone-free], like our beef.
We offer charbroiled, all-natural burgers. You can get a lot of healthful products in our restaurants, from low-carb burgers (wrapped in a) lettuce leaf to a honey wheat bun to a good, healthy burrito. We always try to do stuff to meet expectations.
How has technology — whether apps, your website or in-store tech — affected operations and the restaurants in general?
It impacts the sector as well as our business. In a sit-down restaurant, if you have a touch screen at a table, you can have fewer servers, serve more tables and be more efficient because they are not standing there taking orders.
Research shows people order more when they have their credit cards in hand. In our sector, all automation makes labor more efficient, improves customer service and reduces the amount of time it takes to serve consumers.
If you order on a touch screen, the odds your order will be accurately filled is higher because it goes right from you to the cook, so there’s not a middle man or woman to translate the order. And that will lead to more order efficiency.
Can you explain a bit more to me about your touch screens?
Well, they aren’t in every Carl’s Jr. We tested in Nashville with Hardee’s, and we are beginning to roll them out, like near colleges. As you walk in, one type is at a kiosk, a separate area from the counter. Or we put the touch screen right on the counter and then they take the place of a person. They do this at Chili’s and Applebee’s, for example.
More touch screens would either drive profits up, because they reduce labor costs, or stop profits from going down as rapidly due to actions by the government increasing costs. Automation is [basically] a benefit no matter how you look at it.
However, there are reasons to not like automation, such as it being hard to develop a corporate culture. Or, you have older customers who don’t like to use automation. My biggest objection is that it eliminates entry-level jobs. People like me hate to think of these jobs disappearing. This was my first job, too [fast food], and I needed that job. I can’t imagine someone paying me 12 or 15 dollars to scoop ice cream, though. Not that people aren’t worth that, but there are jobs that don’t produce enough economic benefit to justify it.
What keeps you up at night when it comes to managing the business?
The government over the past seven or eight years has become the greatest threat to small businesses, and to business, generally, in America, and it’s been a constant fight to deal with the different restrictions that government continues to put on economic growth.
For more information on CKE, visit www.cke.com.