Hardee's burger
Tom Gannam  /  AP file
Hardee's turnaround has pivoted on the Thickburger. The fast-food chain's strategy has helped it cash in on young male customers who want burgers instead of Asian salads, said analyst Mark Smith.
updated 6/27/2006 7:28:14 PM ET 2006-06-27T23:28:14

In the past few months, McDonald's Corp. announced it would push healthy meals like salads while Wendy's International Inc. said it would fry foods in a healthier oil with less trans fats.

And what did CKE Restaurants Inc. do? The operator of Hardee's and Carl's Jr. unveiled a jumbo-sized cheeseburger smothered in sliced steak.

"I think the health craze is happening mostly among journalists," said Andrew Puzder, CKE's president and chief executive officer.

A lean man with an athletic build, Puzder laid out CKE's decidedly un-health-conscious business strategy during the company's annual shareholders meeting Tuesday in St. Louis.

The key strategy is simple: Give people what they want, not what they think is good for them.

"The way people like to think they eat, and the way they actually eat is usually very different," Puzder said.

He pointed out that CKE puts salads and low-carb burgers on its menus. "We sell very few of them," he said.

CKE's strategy has worked well for shareholders this year, with its stock rising 7.7 percent over the 12 months to close at $16.21 Tuesday on the New York Stock Exchange. The Dow Jones Industrial Average rose just more than 6 percent in that time.

Puzder said the growth is especially strong considering CKE's position. The company has been revamping its chain of nearly 2,000 Hardee's restaurants that he said were dirty, poorly run and dogged by bad customer service for years.

Hardee's turnaround has pivoted on the Thickburger, Puzder said. CKE knocked 40 items off the menu and centered its offerings around the Monster Thickburger, with its 1,420 calories and 107 grams of fat.

CKE's strategy has helped it cash in on young male customers who want burgers instead of Asian salads, said Mark Smith, an analyst with Sidoti & Company in New York.

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"They're kind of bucking the trend here, by doing this. Speaking as a red-blooded American, I think it's a fantastic idea. It seems to be working for them," Smith said.

But the beef-at-all-costs strategy carries a risk. Puzder conceded the company's national television ads have garnered some complaints. The ads show customers _ mostly young men _ biting into huge burgers with an amplified crunch.

McDonald's and other companies have highlighted their healthier options in anticipation of this summer's release of "Chew On This," a book aimed at teenagers that is co-written by Eric Schlosser, author of "Fast Food Nation."

Early reports about the book say it holds fast-food companies responsible for the nation's childhood-obesity epidemic. A movie version of "Fast Food Nation" is scheduled for release this fall.

Perhaps more alarming for shareholders is the specter of lawsuits pinning the blame for obesity on fast food chains. Such cases have been filed against McDonald's, with most courts dismissing obesity claims. A federal court in New York reinstated part of an obesity case last year after it was dismissed twice by lower courts.

Puzder said CKE should be safe from such litigation for two reasons. First, it doesn't hide health information about its products. Fat and calorie figures are readily available so customers know exactly what they are eating. Second, the company doesn't market to kids, but focuses on young adults.

"As a former trial attorney myself — no, I'm not worried," he said.

Shareholder David Skroup said he's confident in the company's plan to boost revenue and locations worldwide. A retired Air Force pilot who lives in Belleville, Ill., Skroup said he's pleased with CKE's decision to sell big burgers regardless of health-food fads.

"They know what they're doing," Skroup said. "It hasn't knocked the price down and it's increased the number of restaurants."

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