netrashetty
Netra Shetty
CKE Restaurants, Inc. is the parent company of the Carl's Jr., Hardee's, Green Burrito, and Red Burrito restaurant chains. Its headquarters are in Carpinteria, California. It was incorporated in 1964 by Carl's Jr. founder Carl Karcher as Carl Karcher Enterprises, Inc.
CKE Restaurants, through its franchisees, subsidiaries and licensees operates the Carl's Jr, Hardee's, Green Burrito and Red Burrito quick-service restaurants (QSRs). In total, CKE operates 3,052 restaurants in 43 states and 13 countries.[1][2] CKE generated revenue of $1.59 billion in 2007.[3]
With the exception of 16 Green and Red Burrito restaurants, CKE operates in the fast food hamburger segment of the QSR industry. This is a very competitive segment of the business, which CKE occupies with McDonalds, Burger King, and Jack in the Box, among others. The fast food hamburger industry is so competitive because each restaurant offers extremely similar food, and it is hard to differentiate one company from the competition. This leads to price wars in order to attract customers, which hurt the bottom line. Because the industry is so competitive, CKE has tried new ideas to gain an advantage over their competitors, like experimenting with multi-branded restaurants. Recently, CKE has created locations with both a fast-food hamburger restaurant and a Mexican food restaurant (Carl's Jr. is paired with the Green Burrito concept and Hardee's is paired with Red Burrito.[4] The goal of these restaurants is to draw a whole family, who might have different tastes and cravings, to one restaurant. There are still only a few dual-branded CKE restaurants in America, but it is an interesting idea and shows that CKE Restaurants is willing to adapt to a challenging market.
Business Financials
Contents
1 Business Financials
2 Trends and Forces
3 Competition
4 References
In 2007, sales for CKE Restaurants totaled $1.59 billion and the company generated $104.5 million in income, which translates to year over year growth of 4.6% and 34% respectively.[5] CKE Restaurants breaks down its revenue into two categories: revenue from company-operated restaurants and revenue from franchised and licensed restaurants. Company owned restaurants account for 80% of total sales, and franchises provide the other 20% of revenue.[6] Also, revenue from franchised restaurants is growing slower than revenue from company-owned locations (5% vs. 3.2% in 2006).[7]
[8]
Franchising is an extremely important part of the CKE Restaurants business model. At the moment, the majority of CKE restaurants are franchised or licensed out. As of November 2007, CKE had 986 company owned and operated restaurants and 2066 franchised and licensed locations, for a total of 3,052.[9] This translates to about 32% company owned and 68% franchised. However, the vast majority of revenue still comes from the company owned restaurants ($273 million from company-owned stores versus $78 million for franchised ones).[10] CKE continues to expand their franchisee program, with the number of company-owned locations decreasing 9%, and the number of franchisee locations increasing 10.5% in the last year. [11]
[12]
Trends and Forces
Rising Food and Commodity Prices: CKE Restaurants' margins are highly dependent on food prices. In particular, the company is dependent on the price of corn, beef and also oil. Recently, the price of many key inputs has risen and could affect the profitability of the firm in years to come. The price of corn, which is fed to livestock and is also a key input in many processed foods, has doubled in the last two years, due mainly in part to the ethanol boom.[13] Because it now costs more to feed the cattle, the price of beef and chicken, two extremely important inputs for a fast food restaurant, has also risen. In addition, oil prices have risen four-fold since 2001 and the price of gas is also up 40% in the last year alone.[14] Oil is used to produce food, as well as to transport it all over the world. Finally, the price of food has risen due to higher demand in developing countries like China and India.[15]
Changes in Diet/Increased Focus on Healthy Eating: CKE Restaurants could be affected by a shift in consumer tastes and eating habits due to new diet, nutrition, or health trends. Carl's Jr. and Hardee's produce a food that is high in fat and sodium, and is not particularly healthy. Exotic diets, like the Atkins diet, have grown in popularity in the last few years, and have made people more aware of what they are eating and what they should be eating to live a healthy life. If people continue to try to live and eat healthy, it could have a material impact on CKE's profitability.
To read a more detailed discussion of consumer health trends and how they affect the fast-food industry, see also Healthier Food Consumption.
Health Scares: CKE Restaurants is vulnerable to a range of health scares that have affected other restaurants and the fast food industry in general. The two most well known scares are mad cow disease (scientifically termed bovine spongiform encephalopathy, or BSE) and outbreaks of illness from the bacteria E. coli. BSE is a fatal neurodegenerative disease found in cattle. Reports of BSE transmission to humans via consumption of beef began to appear in 2003, prompting many consumers to avoid beef. In the fall of 2006 an outbreak of E. coli was traced to Taco Bell chains in New Jersey, leading to millions of dollars in losses at that chain.
For a more detailed discussion of health scares and how they impacts the food industry, see also Health scares.
Competition
The Quick Service Industry (QSR) is one of the largest components of the over 440 billion dollar restaurant and food service industry, and is one of the most competitive industries in the world.[16] Carl's Jr. and Hardee's most clearly fall under the fast food hamburger category, and competes against multi-national giants McDonalds, Burger King and Wendy's. However, both chains also compete against other QSR concepts. Another huge player in this industry is Yum! Brands, parent company of KFC and Taco Bell. In addition, the Red Burrito and Green Burrito restaurants compete in an extremely competitive Mexican segment, with other well know restaurants Chipotle and Baja Fresh, and Jack in the Box's Qdoba, among others.
CKE Restaurants, through its franchisees, subsidiaries and licensees operates the Carl's Jr, Hardee's, Green Burrito and Red Burrito quick-service restaurants (QSRs). In total, CKE operates 3,052 restaurants in 43 states and 13 countries.[1][2] CKE generated revenue of $1.59 billion in 2007.[3]
With the exception of 16 Green and Red Burrito restaurants, CKE operates in the fast food hamburger segment of the QSR industry. This is a very competitive segment of the business, which CKE occupies with McDonalds, Burger King, and Jack in the Box, among others. The fast food hamburger industry is so competitive because each restaurant offers extremely similar food, and it is hard to differentiate one company from the competition. This leads to price wars in order to attract customers, which hurt the bottom line. Because the industry is so competitive, CKE has tried new ideas to gain an advantage over their competitors, like experimenting with multi-branded restaurants. Recently, CKE has created locations with both a fast-food hamburger restaurant and a Mexican food restaurant (Carl's Jr. is paired with the Green Burrito concept and Hardee's is paired with Red Burrito.[4] The goal of these restaurants is to draw a whole family, who might have different tastes and cravings, to one restaurant. There are still only a few dual-branded CKE restaurants in America, but it is an interesting idea and shows that CKE Restaurants is willing to adapt to a challenging market.
Business Financials
Contents
1 Business Financials
2 Trends and Forces
3 Competition
4 References
In 2007, sales for CKE Restaurants totaled $1.59 billion and the company generated $104.5 million in income, which translates to year over year growth of 4.6% and 34% respectively.[5] CKE Restaurants breaks down its revenue into two categories: revenue from company-operated restaurants and revenue from franchised and licensed restaurants. Company owned restaurants account for 80% of total sales, and franchises provide the other 20% of revenue.[6] Also, revenue from franchised restaurants is growing slower than revenue from company-owned locations (5% vs. 3.2% in 2006).[7]
[8]
Franchising is an extremely important part of the CKE Restaurants business model. At the moment, the majority of CKE restaurants are franchised or licensed out. As of November 2007, CKE had 986 company owned and operated restaurants and 2066 franchised and licensed locations, for a total of 3,052.[9] This translates to about 32% company owned and 68% franchised. However, the vast majority of revenue still comes from the company owned restaurants ($273 million from company-owned stores versus $78 million for franchised ones).[10] CKE continues to expand their franchisee program, with the number of company-owned locations decreasing 9%, and the number of franchisee locations increasing 10.5% in the last year. [11]
[12]
Trends and Forces
Rising Food and Commodity Prices: CKE Restaurants' margins are highly dependent on food prices. In particular, the company is dependent on the price of corn, beef and also oil. Recently, the price of many key inputs has risen and could affect the profitability of the firm in years to come. The price of corn, which is fed to livestock and is also a key input in many processed foods, has doubled in the last two years, due mainly in part to the ethanol boom.[13] Because it now costs more to feed the cattle, the price of beef and chicken, two extremely important inputs for a fast food restaurant, has also risen. In addition, oil prices have risen four-fold since 2001 and the price of gas is also up 40% in the last year alone.[14] Oil is used to produce food, as well as to transport it all over the world. Finally, the price of food has risen due to higher demand in developing countries like China and India.[15]
Changes in Diet/Increased Focus on Healthy Eating: CKE Restaurants could be affected by a shift in consumer tastes and eating habits due to new diet, nutrition, or health trends. Carl's Jr. and Hardee's produce a food that is high in fat and sodium, and is not particularly healthy. Exotic diets, like the Atkins diet, have grown in popularity in the last few years, and have made people more aware of what they are eating and what they should be eating to live a healthy life. If people continue to try to live and eat healthy, it could have a material impact on CKE's profitability.
To read a more detailed discussion of consumer health trends and how they affect the fast-food industry, see also Healthier Food Consumption.
Health Scares: CKE Restaurants is vulnerable to a range of health scares that have affected other restaurants and the fast food industry in general. The two most well known scares are mad cow disease (scientifically termed bovine spongiform encephalopathy, or BSE) and outbreaks of illness from the bacteria E. coli. BSE is a fatal neurodegenerative disease found in cattle. Reports of BSE transmission to humans via consumption of beef began to appear in 2003, prompting many consumers to avoid beef. In the fall of 2006 an outbreak of E. coli was traced to Taco Bell chains in New Jersey, leading to millions of dollars in losses at that chain.
For a more detailed discussion of health scares and how they impacts the food industry, see also Health scares.
Competition
The Quick Service Industry (QSR) is one of the largest components of the over 440 billion dollar restaurant and food service industry, and is one of the most competitive industries in the world.[16] Carl's Jr. and Hardee's most clearly fall under the fast food hamburger category, and competes against multi-national giants McDonalds, Burger King and Wendy's. However, both chains also compete against other QSR concepts. Another huge player in this industry is Yum! Brands, parent company of KFC and Taco Bell. In addition, the Red Burrito and Green Burrito restaurants compete in an extremely competitive Mexican segment, with other well know restaurants Chipotle and Baja Fresh, and Jack in the Box's Qdoba, among others.
Last edited: