Hardee’s Executive Summary
Hardee’s brand attributes as a regional chain (13th largest player in the QSR sandwich category) with a Southeast & Midwest orientation include: made-from-scratch breakfast biscuits; made-to-order charbroiled burgers (with over-sized patties & Black Angus options); hand-breaded chicken sandwiches & tenders; charbroiled chicken line; hand-scooped ice cream shakes; and table service. Hardee’s is unique in that its high-margin breakfast business generates a material sales mix (helping to off-set higher COGs associated with lunch & dinner). The system is catching-up with a new digital order platform which rolled-out in 2021 and its new loyalty program should also help with the brand’s digital presence. Also, the chain’s operational complexity has been helped by past menu rationalization with the possibility of more to follow. After posting annual comp declines from 2016 – 2019, sales turned break-even during 2020 (helped by the popularity of a drive-thru format post-covid) before turning positive during 2021 as the brand’s menu and marketing improvements gained traction. The chain’s repositioning further benefits from a recently announced $500MM brand upgrade (across Hardee’s & sister brand Carl’s) which includes: a remodel program incorporating new restaurant design elements; tweaks to its “Happy Star” logo; and new in-store signage, uniforms & food packaging. All the same, while Hardee’s current positioning benefits from improving relevancy around its menu & marketing, the chain remains challenged to compete with the larger, national players around value/discounting (given an insufficient share of voice to promote both quality & value without prompting trade-down) at a time when lower-income consumers are struggling in the current inflationary economic environment. Also, significant AUV underperformance, high COGs & labor costs (reflecting operational complexities) and elevated ad spend (to compensate for small scale) translates into EBITDAR margin underperformance. Further, a net unit decline for the last 4 years partially reflects a challenged sales-to-investment ratio. In conclusion, while Hardee’s has improved its relevancy around its brand positioning, the need to strengthen its value positioning may still be required to drive its top and bottom lines.