business intelligence 8
BUSINESS INTELLIGENCE AT CKE RESTAURANTS
At a time when most fast-food restaurants were touting nutrition, Hardee’s proudly introduced the
Monster Thickburger. This burger boasts a phenomenal 1,420 calories and 107 grams of fat. It
consists of two, one-third-pound charbroiled 100% Angus beef patties, three slices of American
cheese, a dollop of mayonnaise, and four crispy strips of bacon on a toasted buttery sesame seed
bun. What on earth was CKE Restaurants, the owners of the Hardee’s chain, thinking?
Because of its Business Intelligence System (BIS), CKE was confident about introducing the
Monster Thickburger across the United States. A BIS uses data mining, analytical processing,
querying, and reporting to process a business’s data and derive insights from it. CKE’s BIS, known
ironically inside the company as CPR (CKE Performance Reporting) monitored the performance
of its Monster Thickburger in test markets to ensure that the burger contributed to increases in
sales and profits at restaurants without cannibalizing sales of other more modest burgers. To do so,
CKE’s BIS studied a variety of factors—such as menu mixes, Monster Thickburger production
costs, average unit volumes for the Monster Thickburger compared with other burgers, gross
profits and total sales for each of the test stores, and the contribution that each menu item
(including the Monster Thickburger) made to total sales. Because the sales of Monster Thickburger
exceeded expectations in the test markets, CKE developed a $7 million dollar advertising
campaign to launch its nationwide introduction. Monster Thickburger sales exceeded expectations,
and Hardee’s sales revenues increased immediately, eventually growing by 8%. “The
Monster Thickburger was directly responsible for a good deal of that increase,” says Brad Haley,
Hardee’s Executive Vice President of Marketing.
CKE, partially because of its reliance on CPR, was rescued from the brink of bankruptcy. It
increased sales at restaurants open more than a year, narrowed its overall losses, and finally turned
a profit after three years. CPR, its proprietary system, consists of a Microsoft SQL server database
and uses Microsoft development tools to parse and display analytical information. It uses
econometric models to provide context and to explain performance. The company reviews and
refines these models each month. The econometric models take into consideration 44 factors,
including the weather, holidays, coupon activity, discounting, free giveaways, and new products.
With the click of a button, for example, a sales downturn can be explained on a screen that shows
that 5% of the 8% decrease was due to torrential rain in the Northeast and 2% was due to free
giveaways.
In the competitive restaurant chain industry, companies have to be agile and responsive to the
dynamic environment that they face. They must match their BIS initiatives to their business
strategies in order to improve operations and their bottom lines. BISs assist them in making
strategic decisions about menu items and closures of underperforming stores, as well as tactical
matters such as renegotiating contracts with food suppliers, monitoring food costs, and identifying
opportunities to improve inefficient processes. To derive value from their BISs, many restaurant
chains have successfully reduced the three biggest barriers to BIS success: voluminous amounts of
irrelevant data, poor data quality, and user resistance.
CKE’s CIO and Executive Vice President of Strategic Planning, Jeff Chasney, states: “If you’re
just presenting information that’s neat and nice but doesn’t evoke a decision or impart important
knowledge, then it’s noise. You have to focus on what are the really important things going on in
your business.”
Chasney stresses a BIS should be different from the plain-vanilla standard corporate reporting
tools of old. Rather, a BIS should provide managers with insights rather than just data. He believes
that the context from which the data was collected significantly impacts how that data should be
interpreted. Systems that just report changes without enough background or information on what
caused those changes are not very useful. Managers don’t know what data to trust. Chasney
explained: “If your business intelligence system is not going to improve your decision making and
find problem areas to correct and new directions to take, nobody’s going to bother to look at it.”
The first step to developing a BIS is to understand the company’s decision-making processes.
Before information is collected, analyzed and used in the BIS, someone has to identify what
information is needed to confidently make decisions. For instance, the CEOs of CKE’s three
restaurant chains wanted to understand what made sales fluctuate, while the COOs wanted to
know how to recognize good business opportunities as well as underperforming properties. Then
the BIS designer must determine the appropriate presentation format, be it a report, a chart, or a
Web site.
BIS must add value to the executive’s decision-making processes. To do that, attention must be
paid to the critical performance indicators. For CKE, as Chasney learned, those are sales, cost of
sales, exceptions (such as high-performing or underperforming areas), and business trends.
Discussion Questions
1. How does the Business Intelligence System (BIS) at CKE add value to the business?
2. What are some tips for developing and using the BIS described in this case?
3. Was the introduction of the Monster Thickburger a good idea or an example of information
leading to a wrong decision?
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