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Hardee's is distinguished in QSR by a Southern classic, comfort culture brand positioning which includes table service and a strong breakfast orientation (44% mix). Specialty hand crafted food includes: made-from-scratch breakfast biscuits; made-to-order charbroiled burgers (with over-sized patties & Black Angus options); hand-breaded chicken tenders; charbroiled chicken line with no artificial ingredients, preservatives or antibiotics ever; and hand-scooped ice cream shakes. Value comes in the form of its $5-$7 All Star Meal box every day value platform, various national LTO deals and local offers advertised in-store/on the windows. While the chain's AUV underperforms, its COGs far outperforms the segment average which reflects a profitable breakfast mix and a historical aversion to discounting and low price-points. We also appreciate CKE's plans to separate Hardee's & Carl's (in terms of marketing & menu), benefitting both brands given sharply different geographies and demos. This means Hardee's can now pursue menu, marketing and facilities which best suit its regional orientation in the South & Midwest. Having said all this, the brand remains challenged to compete with the larger, national players around value/discounting because it lacks sufficient share of voice to promote both quality and value sufficiently to overcome trade-down. The challenge is to run Hardee's as a regional brand which requires a very different skill set compared to the past practice of seeking to combine the disparate brands in pursuit of national scale. Some operators believe the brand would be better off emphasizing ample mid-tier choices of higher quality menu options and this reflects the belief that Hardee's is used more as an occasion visit as opposed to a QSR heavy user stop. In any case, a high level of turnover for the brand's ad agencies reflects the difficulty of defining a suitable brand positioning amidst all of these issues. Weak comps over the last couple of years also reflect a lack of an all-day breakfast, operational complexities associated with Hardee's business model that pressures service speed and a lack of a digital ordering platform (which is forthcoming). In conclusion, stakeholders must exercise patience as CKE's new management team continues to find ways to leverage the chain's considerable brand equity built upon quality biscuits, burgers & tenders in a difficult, competitive operating environment sufficient to reinvigorate Hardee's comp performance.

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