Andrew F. Puzder knows what everyone expected when he took over CKE Restaurants Inc.
“I wasn’t a restaurant guy,” he says. “I had been a lawyer, and everybody thought they brought me in to take the company into bankruptcy.”
Puzder doesn’t mince words about why that thinking was justified when he first took over Hardee’s and then became president and CEO of the entire CKE family in September 2000.
“The stock had been at $42; it was at $2,” he says. “We had $600 million in debt, the banks were threatening to foreclose, and Hardee’s was the worst fast-food company in America.
“The first day I got a sales report, and sales were down 12 percent and transactions were down 19 percent. I’m sitting at my desk thinking, ‘What the hell am I doing?’”
CKE, through its franchisees, subsidiaries and licensees, currently includes more than 3,000 Hardee’s, Carl’s Jr., Green Burrito and Red Burrito restaurants. But with 13 major banks circling the company like sharks, it appeared everything was falling apart.
Though other portions of the business were profitable, Hardee’s was losing more money than the then-$1.78 billion CKE could recover. In fiscal 2001, CKE had a net loss of $194.1 million.
Puzder knew that the quick-service industry was a profitable one you can drive down any main road to see examples of that but he had to get to the front lines of the business to fix the restaurants.
“As CEO of a company like this, I could put my feet up on the desk and answer e-mails and call in my direct reports and have them let me know what’s going on,” he says. “But if you don’t go in the restaurants, you don’t really know what’s going on.”
Even though he thought that was priority No. 1, he couldn’t just leave the company in limbo to go on a restaurant tour. So the turnaround began with Puzder changing top personnel to get Hardee’s working on finding its niche. Once those people were in place, he delegated to his new talent and went to visit his 32,000 employees to find the solutions that would put the company back on the path to growth.
Avoid Generic Executive X
The first step in a turnaround is to bring innovation and energy back, so Puzder didn’t wait long to make his first move.
“On the way to the office, not even there, I met the head of marketing for Hardee’s and fired him,” he says.
The idea was twofold. First, he knew that the company’s marketing was broken. Instead of having a distinct name in the business, Hardee’s menu had fried chicken, generic hamburgers, roast beef anything its competitors offered was simply tacked on to its own menu, resulting in a hodgepodge menu that was trying to be all things to all people. Second, he also wanted everyone to know one thing: He was looking for innovation and personal responsibility. He continued that in hiring a replacement.
“I interviewed about 15 people, and they were all kind of the same person,” he says. “They had all worked at the same places, had the same titles, it was like you just had this merry-go-round of marketing people that went through these different companies and came in and nothing ever changed.”
So Puzder called everyone in the business until he found and hired the person that had been the head of marketing for Jack in the Box Inc. in the ’90s. That food franchise had a deadly outbreak of the E. coli virus in 1993 and had been able to come back strong. Puzder knew that instead of hiring “Generic Executive X,” he had someone who had faced uncharted territories in the business.
To Puzder, the problem with most stalled companies is that the parts that make it up no longer understand how to identify a way to separate your business in the market. Finding people who will add innovation is key to your ability to delegate responsibilities, so he looks for people with energy and something to prove.
“I want people that are very dedicated to what they are doing and are enthusiastic about it not just knowledgeable but sort of burned out and just looking for a place to spend the rest of their career,” Puzder says. “I don’t want somebody that’s too bureaucratic, somebody that’s been in a large organization and is used to things being done by committee as opposed to making decisions.
“If you’re bumping them up a little bit, you’re probably going to end up with a more enthusiastic employee somebody trying to show that they can climb this next mountain. If you are hiring somebody that’s done this at three other companies, there’s probably a reason they’ve done it at three other companies.”
Let your people fix the problem
With a company in turmoil, Puzder says you have to quickly become comfortable with letting go of many problems.
“You need to hire good people, and then you need to let them do their job,” he says. “You need to let them do their job and realize they’re not going to do it perfectly and go from there.”
Letting go isn’t always easy, but if you want to take an organization in a new direction, you need to focus on your biggest problem.
“I realized early on you could get a lot more done if you had five people doing it for you, or with you, than you could if you were trying to do all of the work yourself or expecting it to be perfect,” Puzder says.
In so doing, you’ll create a lesson in empowerment across the company.
“They see what you’re doing and the fact that maybe you’re getting a lot more done with a lot less effort, and a smart person is going to pick up on that pretty quick,” he says. “The other part is just direct them to do it, say, ‘Hey, look, don’t do that. Let Jeff do it because I don’t want you wasting your time on that. I want you to do X; you let Jeff do Y, and don’t worry about it.’ It’s teaching and example.”
As he was bringing in unique talent at CKE, Puzder doled out duties accordingly.
“I really delegated responsibility,” he says. “I took (Chief Administrative Officer, Executive Vice President of Franchising and General Counsel) Mike Murphy and put him in charge of refranchising restaurants at Hardee’s. We sold a large number of markets to franchisees and used that money to pay down the debt. I brought our marketing head in and said, ‘Here’s the problems we’re facing; here’s what I think we need to do. Now, you need to figure out what we need to do from a marketing perspective.’”
With new personnel focused on sparking the company, Puzder felt comfortable letting these duties go so he could work on the front lines. An added bonus was the energy inserted into the organization.
“Once I came in, and people felt like we had a direction and we had a plan, morale kind of took care of itself,” Puzder says. “Things began happening, and when things begin happening, people get excited about it.”
Study the front lines
With his focus solely on the front lines, it didn’t take Puzder long to see why Hardee’s was such a drain. Still an unknown to most employees his first year, he regularly visited the order counter and was met by a worker who basically started a staring contest.
“I may not have been a restaurant guy,” he says. “But I thought they ought to say something like, ‘Welcome to Hardee’s; may I help you?’”
So Puzder and a senior executive wrote a script that said just that to help alleviate the rude reputation. A week after writing the script, Puzder visited another Hardee’s and a staring contest ensued. This time he politely introduced himself and asked the now red-faced employee an important question.
“I asked her, ‘Do you know who the most important person in this restaurant is?’ And she said, ‘Yeah, you.’ And I said, ‘No, it’s you because all the millions of dollars we spend are to bring a person to stand right here and look at you. And if you smile, Hardee’s smiles; if you frown, Hardee’s frowns.’ You do that about 20 times, and it really starts to catch on pretty quick.”
There is often a general indifference to basic business guidelines at a stalled company, and Puzder quickly realized most Hardee’s hadn’t touched up on the basic principles in years. He remembers visiting store after store that had windows that were just too clean.
“There are french fries on the floor, people have food on their shirts, the tables are dirty, but they’re always cleaning windows,” he says. “My theory was they were cleaning the windows so people could see how bad it was inside and wouldn’t come in.”
Puzder laughs now, but when he looked into the problem he found his restaurants all had an antiquated 4-inch thick how-to cleaning manual covered in dust.
“I went to school for 19 years; I wasn’t going to read that,” he says. “I had guys running this restaurant, I was lucky if they had graduated from high school; they’re not going to read it.”
His remedy was a 10-page, 10-point book that simplified cleaning so there would be more accountability to it. And, according to Puzder, “The last thing on the list was cleaning the damn windows.”
Beyond checking to see where the basic guidelines are outdated or ignored, constant connection with your front lines can also be a sounding board for consumers and employees. Puzder met with both daily to introduce himself and plainly asked what ideas they had to improve the company.
“Sometimes, they’ll say something that will make you say, ‘Wow, I wish I’d have thought of that,’” he says of filtering through things you hear. “Even then, I’ll run it up the chain of command to make sure that it isn’t something we’ve already discussed.
“The other thing is if you hear the same thing a lot. You go in different restaurants and you hear it from different employees who obviously haven’t spoken to each other. If you see comment cards from consumers that are consistent, then you start to feel that you’ve got a problem here or that somebody has come up with a good idea upon which you should execute.”
Though Puzder is careful to address issues through the proper chain of command, he says some issues like a dirty restroom require instant attention and then a follow-up with supervisors.
With a new focus on running a good restaurant, Hardee’s lost its reputation for dirty units and rude service, which stopped the bleeding. The ensuing rise in business bought the time to make bigger changes, like adjusting the Hardee’s menu to include the mammoth and unique “Thickburgers.”
In turn, CKE had net income of $31.1 million on $1.53 billion in total revenue in fiscal 2008, compared to a net loss of $194 million in 2001. As for Hardee’s, the average store unit made $954,000 in 2008 the average in 2001 had been less than $800,000.
“If you’re going to fix something, you need to fix it where the rubber meets the road, and that’s where the customer is handing you his dollar,” he says. “If things are OK there, they are going to be OK the rest of the way. We were fixing the inherent problems in the way Hardee’s had been run. If your instinct is to cut back on general administrative expenses, you won’t fix a company. If you’re Ford, you have to fix your cars and the way you sell them. In our industry, you have to fix your service, the way you clean your restaurants and then your food.
“We were able to distinguish ourselves, and without doing the first steps in the restaurants to get us back on track, we would not have succeeded.”
HOW TO REACH: CKE Restaurants Inc., (877) 799-STAR or www.ckr.com