CASE STUDY: BUSINESS INTELLIGENCE AT CKE RESTAURANTS

At a time when most fast-food restaurants were touting nutrition, Hardees 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 Hardees 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 businesss data and derive insights from it. CKEs 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,

CKEs BIS studied a variety of factorssuch 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 Hardees sales revenues increased immediately, eventually growing by 8%. The

Monster Thickburger was directly responsible for a good deal of that increase, says Brad Haley,

Hardees 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.

CKEs CIO and Executive Vice President of Strategic Planning, Jeff Chasney, states: If youre

just presenting information thats neat and nice but doesnt evoke a decision or impart important

knowledge, then its 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 dont 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, nobodys going to bother to look at it.

The first step to developing a BIS is to understand the companys 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 CKEs 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 executives 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?