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For Carl's Jr. and Hardee's, 2 are better than 1

Take a look behind parent company CKE Restaurants' decision to split its twin brands.

Carl’s Jr. and Hardee’s are going it alone.

The burger brands’ parent company, Roark Capital-owned CKE Restaurants, has long treated the chains as a single brand. The two have the same menus and the same marketing. Their store designs and service models were the same, and their logos were the same—even if their brand names were different and they were largely considered separate entities.

Problem was, they weren’t the same brand, not really. So, under new CEO Jason Marker, the two brands have started to advertise as the separate, regional brands they are—beginning with new Carl’s Jr. ads this week featuring the actor Matthew McConaughey called the “Call of Carl’s.”

“These are two iconic, regional brands, and they have the opportunity to become more relevant and more contemporary,” says Marker, the former CEO of KFC in the U.S. who took over as CKE’s chief executive last year. “I have a fascination and love of regional brands. There’s this huge amount of brand loyalty and enlightened brand equity in regional brands.”

Both Carl’s and Hardee’s have long histories. Carl’s traces its roots to 1941, when Carl Karcher and his wife borrowed $311 to start a hot dog cart in Southern California. Its nearly 1,200 locations are primarily out West.

Hardee’s, meanwhile, was founded by Wilber Hardee in Greenville, N.C., in 1960. Its nearly 1,900 locations are primarily in the Midwest and the South.

Carl’s bought Hardee’s in 1997 with the idea of creating a large, national chain that would be a bigger, nationwide competitor to the big three burger chains, McDonald’s, Burger King and Wendy’s.

But that combination only went so far. The two brands kept their distinct names. And, it turns out, they kept their distinct brand identities.

“They have distinct customers,” Marker says. “They grew up very differently. Their customers love them for who they are.”

Marker, who says he is “a very big believer in data over opinion,” reached that conclusion after spending time doing foundational research on the chains, their customers and their markets. “All our research said that,” he said.

They are both strong regional brands. Hardee’s is the nation’s 34th largest chain, according to Technomic's Top 500 Chain Restaurant Advance Report, with $2.3 billion in system sales in 2017. Carl’s is No. 40, at $1.5 billion.

Carl’s has “a West Coast feel about it,” Marker says.

“It’s impossible to ignore,” he says. “It’s bold, disruptive.”

Hardee’s, meanwhile, is more of a “comfort food” destination fitting its Southern heritage. “It’s authentic, earnest, handmade American classics,” Marker says. “It’s a little bit more in the comfort food space.”

CKE employed its creative agency, Havas, to develop ads featuring McConaughey, whose voice and attitude, Marker says, “fits the Carl’s Jr. brand perfectly.” The multichannel campaign seeks to create a “crave culture” at Carl’s that fits the brand’s historic reputation.

CKE plans a set of ads for Hardee’s, too, that it will reveal in the coming weeks. Details of that campaign aren’t available, but Marker promises the campaign will be an “equally iconic, very exciting, amazing expression of the brand.”

The separation of the two brands does not stop at the marketing. While the brands have largely the same menu, that will change over time as the company develops specific items relevant to each brand—though there will be “some overlap.”

“We will always make sure whatever products being sold are the right products for those brands,” Marker says. “We’re developing whole product pipelines specific to those brands.”

The company is developing new remodels and new assets that are “very brand specific,” Marker says. And he says the chain’s franchisees, who operate most of the locations for both brands, are on board.

“Our franchise partners are very excited about the separation of the two brands and where we’re taking them,” he said.

To be sure, there are risks. It is fundamentally less efficient to market two regional chains than it is to market one national chain.

But Marker says it’s worth the risk. “Any loss in marketing efficiency clearly outweighed the positive benefits of expressing the brands’ identities,” he says.

Then there’s this: CKE has spent years marketing its two brands to a very specific set of customers, or what Marker’s predecessor Andy Puzder called “young, hungry guys and guys who want to be young hungry guys.”

Carl’s and Hardee’s a year ago shifted away from those ads, which routinely featured scantily clad, female models.

That shift was not successful, at least according to consumer perception firm YouGov BrandIndex, which found that Carl’s “purchase consideration” has declined from 14% last August to 11% now.

But Marker says the company is targeting its brands’ respective identities more specifically. “We see very strong brand associations, brand love and blatant brand equity these regional brands people often grew up with,” he says. “It’s important we retain those personalities, retain who they are and what they are.”

And Marker says there are definite strengths in the brands that could play well in the ultra-competitive burger market, one occupied by some of the world’s largest restaurant chains. The company, he says, has an opportunity to market those strengths, which include table service in restaurants and hand-scooped ice cream in the chains’ milkshakes.

“One of the appeals of this job, a huge appeal, was their unique positioning and the food quality,” Marker says. “We are very focused on personal experience, such as table service as a brand, and iconic products.”

“We have so many distinctive, unique stories,” he adds. “And we have opportunities to tell that story we probably haven’t capitalized on, like our hand-scooped ice cream or our breaded chicken tenders in an egg and buttermilk wash. I’m not sure anybody else does that.”

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